In a wave of economic crisis which is spreading rapidly throughout the country, the Delhi government lit a lamp of hope amongst the 55,00,000 minimum wage workers in Delhi, by more than doubling their wages, last month. It is an unprecedented and largest pay hike ever for the unorganized sector since the Minimum Wages Act (MWA) of 1948 was first introduced in the country. The wage hike comes after a three year bitter battle fought on the streets and then taken all the way to the Supreme Court (SC). The SC ruled in favor of the government and the workers, following a stringent attack on them, by the powerful traders and industrialists lobby. As many as 40 of their associations had approached the courts opposing the wage hike tooth and nail.
The wage hike also comes at a time when the 7th pay commission by the central government, which promised a hike of 33% in wages of central government employees on papers, after a decade long wait, is still languishing since it was announced in June 2016.
The unorganized sector comprising of workers and laborers in government institutions, small scale industries, manufacturing units, textile and garment industries, retail outlets, hotels, hospitals, construction companies, domestic servants, all contribute to 60% of the country’s GDP and yet they constitute the poorest sections of society. “Cheap labor” in the Indian context translates into extreme exploitation of the weaker sections by the trader and business community and the various industries who employ them.
Labor costs are seen as one of their biggest chunk of expenses by the employers, and keep the wages low under the mistaken notion that it keeps their profits high. Though the MWA was passed to protect the workers from exploitation and ensure that they have a minimum standard of living, which covers their basic food, clothing, shelter and education needs for their children, one glance around you and you know what a sham of a legislation it really is.
One of the major flaws of the MWA is that the wage hike is not linked to inflation, as a result of which
wages fail to keep pace with rising costs and continue to diminish, over the years. Another major flaw is that the law is not at all binding on the various governments to revise the wages every five years, as envisaged. As a result of which the wage hikes come after a decade or more, during which time inflations hit the roof, keeping them tied to extreme poverty. The last wage hike happened in Delhi in March 2010.
The state and central governments whose responsibility it is to ensure the strict implementation of MWA, find it more profitable to warm up to the industry instead, in exchange for much needed election funds.
The workers who are the first to fall off the chain, when a crisis in the economy strikes as witnessed during demonetization in India, are further kept in check with threats of losing jobs, if they demand a pay hike. Cash and liquor distribution to them during elections, ensures that the same corrupt parties are voted back to power.
India now has the dubious distinction of leading the list of the countries, with the highest number of extreme poor, followed by Nigeria, Congo, Ethiopia and Bangladesh, according to a World Bank study, by senior economist Roy Katayama and Divyanshi Wadhwa, in January this year. Hardly anything to beat your chest over in an extreme display of nationalism, as the current political dispensation, headed by Prime Minister Narendra Modi of the Bhartiya Janata Party (BJP) in the country would want.
In this scenario, it is highly commendable that the Delhi Minister for Employment, Development, Labor and Irrigation, Gopal Rai, did not give in to bribes or threats from the industry, and stuck on course for three long years, strictly monitoring court proceedings, to ensure that the enhanced wages are given to the workers. “I was besieged by this powerful and rich lobby to give in to their demands, on the grounds that their businesses are suffering, made worse by the present economic crisis and pleas that the additional burden of paying higher wages would hurt them further. But my reply to them was if you are suffering, can you imagine how much your workers are suffering? There is not enough on their plates, leave alone any other comfort. What could be worse than having to go to bed hungry, after an entire day’s labor? It is a matter of daily survival for them, which the SC agreed to,” said the minister.
“Initially we had intended to make all contractual staff permanent. However, since Delhi is not a full state, and we do not have a control over services, we cannot employ any new staff, though we have over 2,00,000 vacancies. We cannot make the thousands of existing contractual staff permanent either, until the SC intervenes again and gives us control of services, which it has been dilly dallying over since the last three years”, he said.
Minimum Wages act of 1948, was considered to be one of the most important powerful pieces of legislation passed to protect the poor from fading into poverty and yet decades later the country is still grappling with it, simply for lack of intentions and a strict implementation of the MVA.
There are several reasons why this law is important:
Firstly, it was that evident workers who can cover the cost of their living have better morale and are more productive.
Secondly, reduced income inequality provides an incentive to work.
Thirdly and most importantly a minimum wage spurs economic growth. It gives workers more money to spend. This increases demand and business revenue.
Fourthly, workers who have more time and money can then invest in their education. This further increases their productivity and innovation.
Fifthly, minimum wage laws benefit individual businesses. Workers are less likely to leave to find a higher-paying job. This reduces turnover and expensive retraining costs.
Despite the advantages, most employers are too focused on immediate returns, often turning their businesses and establishments into sweat shops. Despite the vast number of workers in unorganized sector, and their substantial contribution to the national economy, they are amongst the poorest sections of India’s population.
Poor enforcement of the MWA is another issue prevalent in most of the states in India. Many workers for the fear of losing their jobs do not report about payments lower than the minimum wage rate. At times, these workers are even forced by their employers to certify payments below minimum wages.
“In many instances it was found that since the salaries are required to be credited directly to the bank accounts of workers, more often than not, the contractor would have access to the debit cards of the workers, with which he would withdraw part of the workers dues,” said Gopal Rai.
To put an end to this malpractice, “we amended contract laws to enhance punishments for defaulting contractors. Earlier when found guilty, the maximum punishable offence was only for six months and the fine was only Rs 5000. The punishment has now been enhanced from six months to three years and fine has been increased to RS 50,000. This besides the embarrassment of being prosecuted, which was not the case earlier, since they would bribe the labor inspectors, will help us curb the exploitation to a large extent”, the minister said.
Since the notification was issued, 1373 government contractors were found guilty of violating the notification and were removed.
Gopal Rai, himself conducted two major drives, and registered over 100 cases against employers. Cheating cases were filed against six employers for holding on to the ATM cards of employees.
Though the recommended wage increase for all categories is less than 12 %, the Delhi government went ahead and increased up to 52 % of their wages. The wages for unskilled laborers have gone up from Rs 8652 to Rs 14,842. Wages for semi-skilled has increased from Rs 9542 to Rs 16,141. Wages for skilled labor has gone from Rs 11,830 to Rs 17,991.
In comparison, while Delhi pays its unskilled workers in Delhi Rs 14,842, Haryana pays Rs 8827, Gujarat Rs 8190, Jharkhand Rs 6485 and Uttar Pradesh has one of the worst figures at Rs 5750.
The national minimum level is a pathetic Rs 4628. Despite recommendations by various committees, the central government is yet to rectify this.
As soon as the Aam Aadmi Party (AAP) came to power, within a year in April 2016, a minimum wage committee comprising of union leaders, laborers, trade associations and industry associations was set up. They gave their report by August 2016, which was promptly declared null and void in a tussle between state and center, since Delhi is not a full state and the elected government has limited powers.
A fresh committee was set up in September the same year, who gave their report February 2017, and the state government published a notification in March, after which wages were increased with immediate effect. However, 44 employer’s associations went to High Court, challenging the wage hike, which then gave a stay in August and much to the shock and disappointment of the workers, wages went back to the old figures.
The state government was determined not to give up and approached the SC to reverse the order. The SC gave an interim order, and asked the process to be done again, after the traders complained that they were not adequately represented. The process was finished within four months and finally on October 14, SC declared the state government’s earlier notification void and the workers ended up getting a bumper Diwali.
While announcing the wage hike, the chief minister, Arvind Kejriwal, stated that it would have been easy for them to be simply bribed by the trader’s associations too, since his party is experiencing a severe shortage of funds as well, “but that would have been a gross injustice against the workers, who were relying on us to get them a decent wage”, he said.